Lawyer testifies in own defense in malpractice lawsuit trial

Thursday

May 16, 2013 at 12:01 AM

Messick says bank knew of conflict of interest

By JOSH SALMAN

Prominent Sarasota real estate attorney Robert Messick testified Wednesday that he told First Priority Bank about a potential conflict of interest in a deal involving a Manatee County residential development.

The Icard Merrill partner also said that the Bradenton bank still requested he represent it, despite knowing he also represented a set of real estate investors hoping to borrow money from First Priority as part of the deal.

In addition, Messick told the courtroom that the borrowers did not possess an option to acquire a 25-acre tract that would have increased the development's value and lessened the bank's risk on the $5.3 million loan.

The Federal Deposit Insurance Corp., which is suing Messick and Icard Merrill, alleging malpractice and breach of fiduciary duty, contends that the attorney told the bank an option did exist. The FDIC, which is the receiver for the failed First Priority, is seeking $4.6 million in damages.

"It was my belief we did have a potential conflict of interest," Messick acknowledged during five hours of testimony Wednesday.

"I disclosed that potential conflict directly to (the loan officer) who first contacted us about representing the bank," he added. "I asked him if the bank would be willing to waive that, and he agreed."

Messick represented the bank in preparing loan documents for a 97-home community called River Meadows. But he also represented the land seller and a second lender that stood to receive a lion's share of the First Priority loan to satisfy other debt.

The FDIC contends Messick could not remain impartial representing so many parties.

The 25-acre parcel is significant, the agency argues, because the bank would not have loaned the $5.3 million to Messick client and real estate investor Mark Brivik and his partners without it. The Brivik-led group defaulted on the note just 18 months after receiving the loan.

In all, First Priority cost taxpayers $96 million when it collapsed under the weight of bad debt in August 2008, records show.

The FDIC's case has relied largely on three documents, including a credit approval request that suggests the 25 acres was required as collateral; a hand-written sketch that identifies that same land as the "option property;" and a document put together by Messick's assistant that showed Messick represented Brivik in the loan closing.

Al Perez, a Coral Gables attorney representing the FDIC, said those official forms speak volumes. He argued that the frequency of errors in one commercial real estate loan was intentional.

"How else can you explain it?" Perez asked.

Messick, though, offered several explanations.

He reiterated that he notified First Priority chief lending officer Steve Putnam of the potential conflict, and Putnam agreed to waive it.

Although there is no documentation to prove that conversation happened, Putnam testified Monday that the discussion took place.

Messick also said he notified Putnam that the credit- approval request report was in error when it referred to an option contract to buy the 25 acres.

Moreover, the 25-acre property was not included in an appraisal, environmental study and survey required to process the loan. Messick's defense team argues this shows the land was excluded from the deal.

"There was an error in the credit approval request," Messick said. "When I saw the document, I told Mr. Putnam immediately that there was no option contract ... At all times, I gave my best loyalty to the bank in closing this loan."

An FDIC expert witness testified Wednesday, however, that both the bank's top officers and Messick should have known better.

Mark Riley, the cofounder of Financial Institutions & Resources Inc., said it was a conflict of interest, whether Messick fully disclosed his representation of each party or not.

He also said the document clearly showed the option on the 25-acre parcel, and added that either Messick or the bank should have amended the documents after the loan was issued if they indeed learned the option was not available.

"Especially for a bank of that size, an integral part of putting the whole loan package together is to make sure your outside counsel is a fierce advocate of the bank," Riley said.

"In my opinion, you cannot be a fierce advocate if you represent other interests in the deal."